If you type in the search phrase ‘how to start an Airbnb business’ in Google, you will get over 44 million results. This is a clear sign of the growing popularity of short-term rental properties with real estate investors. And there’s no mystery surrounding why so many people want to jump into this line of business. A recent report reveals that Airbnb generated a revenue of $4.7 billion in 2019 alone.
However, things have not been so rosy for Airbnb in 2020 due to the coronavirus pandemic. With the stay-at-home orders and travel restrictions, Airbnb bookings have reduced drastically. According to bloomberg.com, revenue in the second quarter plunged by at least 67% compared to the same period last year.
With the gradual reopening of economies, the Airbnb business is now slowly picking up. While some areas have been slower to recover than others, new bookings are up nationwide since they dropped in March 2020. As many are still putting off travel plans, 2021 is likely to see an explosion of pent-up travel demand – this could mean big returns for Airbnb hosts next year.
Related: Will Airbnb Survive the COVID-19 Pandemic?
So if you are thinking of starting an Airbnb business in 2021, here is what you need to do:
Choose the Right Location for Starting an Airbnb Business
Location is a crucial consideration when looking for Airbnb properties for sale. You want to choose a city where hosts are earning good returns. Let us look at some of the best cities for Airbnb investment in 2021 based on cash on cash return. The figures are derived from Mashvisor data and the cities on this list have proven to be resilient during COVID-19, as hosts are currently earning a good return:
#1. Greenville, North Carolina
- Median Property Price: $277,180
- Price/Square Foot: $114
- Airbnb Daily Rate: $102
- Airbnb Rental Income: $2,590
- Airbnb Cash on Cash Return: 7.6%
#2. Mesquite, Texas
- Median Property Price: $215,251
- Price/Square Foot: $129
- Airbnb Daily Rate: $139
- Airbnb Rental Income: $2,498
- Airbnb Cash on Cash Return: 7.6%
#3. DeSoto, Texas
- Median Property Price: $289,619
- Price/Square Foot: $116
- Airbnb Daily Rate: $290
- Airbnb Rental Income: $3,238
- Airbnb Cash on Cash Return: 6.8%
#4. San Angelo, Texas
- Median Property Price: $336,155
- Price/Square Foot: $147
- Airbnb Daily Rate: $134
- Airbnb Rental Income: $4,518
- Airbnb Cash on Cash Return: 6.7%
#5. Abilene, Texas
- Median Property Price: $289,093
- Price/Square Foot: $139
- Airbnb Daily Rate: $178
- Airbnb Rental Income: $2,814
- Airbnb Cash on Cash Return: 6.5%
#6. Kalamazoo, Michigan
- Median Property Price: $288,617
- Price/Square Foot: $128
- Airbnb Daily Rate: $110
- Airbnb Rental Income: $2,399
- Airbnb Cash on Cash Return: 6.2%
#7. Lansing, Michigan
- Median Property Price: $167,718
- Price/Square Foot: $96
- Airbnb Daily Rate: $150
- Airbnb Rental Income: $1,899
- Airbnb Cash on Cash Return: 6.2%
Once you select a city, you need to continue with your Airbnb market research and choose a neighborhood that is safe, accessible, and has a potential for profit. Mashvisor’s real estate heatmap is an Airbnb analytics tool that will show you the best areas to invest in Airbnb property. You can conduct your search using filters like Airbnb rental income, listing price, Airbnb occupancy rate, and cash on cash return.
Learn more about this powerful tool: This Heatmap Will Show You Where to Invest in Real Estate
Get Familiar with Local Airbnb Laws
Many cities and counties have laws and regulations governing the Airbnb business. Such laws can be found in the city’s administrative or zoning code. For example, some cities have a restriction on the number of days a home can be rented out for short stays. Others place a limit on the number of people that can stay in the rental property at one time.
Cities that allow Airbnb rental properties usually require hosts to apply for a permit before starting an Airbnb business. This basically involves undergoing inspection to check if your property is habitable, then paying an annual fee. Failing to acquire a permit or breaking other Airbnb regulations could result in steep fines.
Related: 10 Cities with Airbnb Legal Issues in 2020
Select the Most Profitable Income Property
After choosing a suitable location for your Airbnb business, the next step is to assess the profitability potential of different investment properties for sale. This requires Airbnb investment analysis tools. Mashvisor’s Airbnb profitability calculator will gather all the necessary Airbnb data and calculate all the vital metrics for assessing the performance of any property. Once you input the financing costs, this Airbnb calculator will generate the expected cash flow, cash on cash return, and cap rate. You need to analyze all of these metrics to ensure a profitable Airbnb business.
Price Your Airbnb Rental Property Accordingly
To be sure you’ll make a profit in the Airbnb business, think carefully about how to price your rental. First, consider all the costs involved in running your rental including:
- Mortgage payments
- Business licenses
- Local, state, and federal taxes
- Host service fees
- Cleaning supplies and costs
- Cost of repairs and maintenance
- Cost of new décor or furniture
Besides the expenses, you should also look at how other vacation rentals and hotels in the neighborhood are priced. Initially, you could consider listing your property at a lower rate, and then charging more when you have some positive reviews.
If you want to quickly estimate Airbnb income and see how much you should charge, refer back to Mashvisor’s Airbnb profitability calculator.
List Your Property
You must ensure that your Airbnb listing stands out from all the competition. In the description, mention the condition, style, atmosphere, and uniqueness of your space. Highlight any services guests can enjoy such as free parking, in-house laundry, and free WiFi. Don’t forget to talk about the attractions and amenities in the neighborhood.
Before taking photos, make sure your spaces are clean and tidy. For best results, use natural light to highlight your Airbnb rental property’s best features such as a hot tub, fireplace, or great views from the porch. Finally, consider adding captions to provide some context.
Your Airbnb host profile should assure guests that you are authentic and reliable. In a few words, mention your interests and hobbies, a book you are reading, or even your favorite type of music. Don’t forget to add a profile photo of yourself, preferably smiling.
Adhere to the Airbnb Health and Safety Requirements
We cannot talk about how to start an Airbnb business in 2021 without mentioning COVID-19 health protocols. Airbnb has come up with mandatory safety practices for both guests and hosts of Airbnb listings. These health and safety requirements are based on guidelines from the US Center for Disease Control and the World Health Organization. Guests and hosts must agree to:
- Maintain a distance of 2 meters/6 feet from each other at all times
- Wear a face covering or mask when engaging in person
- Wash hands often with water and soap for a minimum of 20 seconds
- In case water and soap are not available, hand sanitizer that contains not less than 60% alcohol can be used
Hosts are also expected to follow Airbnb’s five-step cleaning process between guest stays. In addition, you are not allowed to interact with guests if you have tested positive for coronavirus within the last 30 days, or are showing symptoms of possible infection.
Any guest or host that repeatedly breaks these rules may be removed from the community or have their Airbnb business account suspended.
Is owning an Airbnb in 2021 a good idea? Yes, and anyone can learn how to start an Airbnb business. While we have to wait to see what the US housing market 2021 brings us, an Airbnb can still be profitable.
One final tip we have for those just starting out – consider putting together an Airbnb business plan.
Now that you know how to start an Airbnb business, start looking for a property with Mashvisor.